How has the online revolution transformed the banking sector?

Ever since the financial crisis of 2008, the banking sector has been undergoing change: change in regulations, changes in bonus payments and changes in the way banks do business with their customers. Put simply, the banking sector has been forced to adapt, and the growth of the web has played a huge part in this evolution.

Going virtual

What does this mean for the consumer? Well, perhaps the most noticeable change to consumers is the way they interact with their bank. Previously, it was common for banks to have a physical presence on most high streets where a person could go to pay in and take money out. Many of these are now in the process of closing down or have already closed as fewer people are using them. This is because internet banking has become a way of life, made even easier by the advent of mobile devices that enable users to manage their money on-the-go. This makes life a little more difficult for those users who do not have the inclination or ability to use internet banking. They will need to travel further to find a bank they can use or rely on ATM machines. They will probably also have to cease using checks as payment.

There have also been changes to way the banks offer their services. For example, whereas once checking accounts were free, these now come with a charge. This is largely attributable to the fact that banks are now looking for new revenue streams, as updated restrictions have limited the amounts they can charge for credit card usage and penalties.

These new levies have meant, however, that some consumers are looking for better financial deals outside the big banks. Loans, for example, are being sourced from smaller providers who have wholeheartedly embraced the online world and make their offerings available only via the internet and mobile apps. This helps to keep their running costs and overheads down as they do not have to provide physical premises and can thereby pass these savings on to their customers.

This is also true of credit card providers. These are now being offered with highly competitive terms by non-traditional banking firms, such as myoptplus.com, owned by the Community Financial Services Association of America committee member Don Gayhardt. Companies such as these have diversified their offerings to not only include loans, investments and credit cards, but pre-paid debit cards, thereby tailoring their services to meet individual needs rather than the one-size-fits-all approach favored by many larger banks.

There is another significant advantage to online banking and that is the ease of accessibility it offers. With a physical, high street bank, a person had to operate within the bank’s standard trading day. With the internet, money can be withdrawn, paid in or transferred at any time of the day or night.

Does all this simplicity and ease of access mean that the high street bank is doomed? Perhaps not. Many people still want to have a personal experience in many of their business transactions, including banking. Being able to put a face to an entity imbues a sense of trust, which is what many consumers feel is lacking in big corporations who only have an online identity. This is where a local bank can benefit hugely over an online offering, although they may not have the scope nor the means to offer the wide range of services, i.e. loans, investments, that a larger bank may.

It does seem that the banking sector will become more and more dependent on its online services, but that it may be a good idea for banks not to move online entirely, but keep a few physical high street locations so they can give their customers some human contact. After all, managing money is one of the most critical aspects of our daily lives, and sometimes it is definitely nice to have a friendly face to help.